STUDENT LOANS AND DEBT COLLECTORS

On 6th February 2017 the Government announced plans to sell the collection of 12 billion pounds of outstanding student loans to private debt collectors. These are debts which have arisen from the failure to repay student loans taken out before 2006, which otherwise were normally recovered when a certain threshold in earnings was reached direct to the Student Loan Company and the Government.

LOANS IN THE LATEST SALE

The first part of the transfer covers loans which became liable for repayment between 2002 and 2006. The sale is being undertaken in accordance with the Sale of Student Loans Act 2008.

Normally, student loans become repayable when graduate income reaches a certain income threshold. The previous sale in November 2013 of £890 million in outstanding loans went to Erudio Student loans who paid £160 million for the right to recover this money arising from loans taken out between 1990-98. The conduct of the company led to numerous complaints and an apology when it tried to recover excessive amounts from students whose income fell below relevant thresholds.

The latest announcement means that many students or former students from the period prior to 2002 may find themselves contacted by debt collection companies who will be seeking to collect the outstanding money.

Of particular concern is that section 3 of the Sale of Student Loans Act 2008 allows the purchaser to transfer the right to collect the loans to another debt collector. So the debt may end up with a different company to that the Government has selected. Under section 1(6) of the Act transfer can be made without the borrower’s consent.

Claims by debt collectors for student loans are already known to Nucleus and caution has to be taken with any claim or contact coming from a debt collector. Claims may arise not just for student loans but also for unpaid fees arising from college accommodation or unpaid utility bill claims. Private debts collectors are also used for store cards and some utility debts and many former bank debts.

SOME RULES FOR STUDENT DEBTS AND OTHERS PASSED TO DEBT COLLECTORS

Everyone liable to repay a student debt included in this sale should receive a letter within 3 months from the Student Loan Company. The SLC will write to all customers, at their registered address, advising if their loans are included.2.Student loan related debts are not priority debts. They should not be placed ahead of paying rent, council tax and essentials such as food or utilities.

Debt collectors have no right to force or demand entry to your home – even if they suggest that they have. As a basic safeguard people should keep their doors closed and beware of bogus callers and people impersonating debt collectors.

If telephoned or texted by someone purporting to be a debt collector do not share personal information or data – it may be a bogus caller. If the company is serious it will put details in writing.

Anyone contacted about student loan debts should seek advice, particularly if a document from a court or purporting to be from a court is involved. It is important not to ignore anything that resembles a court claim but debt collectors have been known

Liability to repay these debts cannot be transferred from the student to spouses, parents or third parties.

A check should be made to see any paperwork is genuine, particularly to check if any right to recover the debt has been properly transferred in law to the debt collecting company,

If an alleged debt is old – i.e. over 6 years it may be statute barred. This does not apply to alleged social security payments which since 2012 have no time limit on recovery (but may not be recoverable for other reasons).

Any repayment agreement reached over a student loan should be one that is affordable, based upon ability to pay. If you have other debts then a payment plan needs to be worked out.

The amount being claimed should always be checked. With so many claims involved, the possibility of errors is considerable.

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